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Author Question: How do changes in interest rates affect exchange rates? What will be an ideal ... (Read 122 times)

jeatrice

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on: Jun 30, 2018
How do changes in interest rates affect exchange rates?
 
  What will be an ideal response?

Question 2

Special taxes levied on earnings for Social Security and Medicare are called
 
  A) an unfair tax on low-income families. B) an exception tax for corporations.
  C) a social insurance tax. D) a withholding tax on wages.
Macroeconomics: Principles, Applications and Tools ¦ O'Sullivan, Sheffrin, Perez ¦ 7th Edition
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javimendoza7

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Reply #1 on: Jun 30, 2018
Answer to Question 1

Changes in interest rates affect the value of a country's currency vis--vis other currencies. When the interest rate in an economy increases, investors want to invest in the economy. This increases the demand for the domestic currency causing it to appreciate against other currencies in the foreign exchange market. On the other hand, when interest rate decreases in an economy, the country's currency depreciates.

Answer to Question 2

C


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jeatrice

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Reply #2 on: Jun 30, 2018
Thank you :)


javimendoza7

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Reply #3 on: Jun 30, 2018
Happy to help you


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